Investors scramble for Emerging Nigerian oil firm Seplat

Investors are betting on the emergence of a Nigerian made global brand or African champion in the oil and gas space with the scramble for shares of Seplat Petroleum Development Company, which raised $500 m in an initial public offer (IPO), last week.

The deal valued the Nigerian oil and gas group at $1.9bn and provided a significant boost to the country's homegrown energy industry.

Seplat's shares have risen about 15.7 percent on t he Nigerian Stock Exchange (NSE), since it started trading on Monday April 14, as investors buy into the long term prospects of value creation and capital gains which the company provides as the only listed direct play on Nigeria's vast oil wealth.

"The Exchange made a commitment to facilitate durable wealth creation by listing and nurturing the next group of African champions. That is, companies with over $1 billion in market capitalisation with operations across the continent," said Oscar Onyema, CEO of the NSE.

"We view SEPLAT's listing as a major step in becoming an African champion."

The IPO ranks as the largest for a sub-Saharan company since Kenya-based telecom group Safaricom's in 2008, according to Dealogic.

The flotation is also the second largest for a Nigerian company.

"Seplat listing is about industrial development. It is the first time in history to have a Nigerian company in dual listing. Success of this has shown the world believes and understands the Nigerian story," Olusegun Aganga, Nigerian Minister for Industry trade and investment said at the NSE.

The homegrown Nigerian oil industry has experienced dramatic growth over the past five years, buying assets worth $5bn from oil majors such as Shell and Total of France.

Seplat said it would use the funds to further expand and pay down net debt, which stood at $141m at the end of 2013.

The company pumps about 60,000 barrels a day from its 45 per cent interest in three crucial fields in the Niger delta, which it bought from a Royal Dutch Shell-led consortium in July 2010. Seplat operates the oilfields.

"Seplat is the only oil company, not indigenous company, the only oil com pany producing above its technically allowed capacity," Group Managing Director of the NNPC, Andrew Yakubu said at an event to mark Seplat's LSE listing last week.

Industry executives believe other homegrown Nigerian oil and gas companies are now likely to follow Seplat's lead and seek a listing in London, Lagos or Johannesburg in the next 12-24 months.

Seplat's successful listing shows the success of Nigeria's policy of indigenization of the oil sector, according to Diezani Alison Madueke, Nigeria's Minister for Petroleum Resources.

"We support Nigerian oil companies in the upstream, midstream and downstream oil and gas space," Madueke said at the Seplat facts behind the listing presentation at the NSE.

"This is part of a deliberate Government policy of encouraging oil sector participation for our local companies. We expect more Nigerian oil and gas companies to list on the NSE in the future."

Seplat plans to grow its business through three planks of organic growth, gas commercialisation and acquisitions, said it's MD/CEO Austin Avuru.

"We have the reserve base to grow our business. Our target is to grow our gas production to 400 m scf by 2016 from 130 m scf today and oil production to 84,000 bpd in 2016 from 72,000 bpd today," Avuru said.

"We have the strongest balance sheet of any indigenous oil and gas company."

Miguel Azevedo, head of Africa investment banking at Citigroup, said the deal sets a new benchmark for the Niger Delta region "that has not been on the radar screen of institutional investors."